Closing entries are unnecessary if the business plans to continue operating in the future and issue financial statements each year.

Question

Quizplus · Accepted Answer

Closing entries are necessary to transfer the balances of temporary accounts such as revenue, expenses, and dividends to retained earnings at the end of each accounting period. This process ensures that the accounting records accurately reflect the financial performance and position of the business for the period. It is a standard accounting practice regardless of whether the business plans to continue operating or issue financial statements in the future.

Closing Entries Are Unnecessary If the Business Plans to Continue